January 2017

01/30/2017

I define a serious-minded entrepreneur as a person running a company who pays close attention to the two "factories" that exist in every business:

The customer factory and the money factory.

The customer factory is the part of your business dedicated to creating happy customers. A happy customer is a customer that loves your products and services, comes back often, and refers their friends and associates to you.

The money factory is the part of your business dedicated to creating happy owners. A happy owner is an owner who receives healthy (and predictable) cash distributions from the business.

A serious-minded entrepreneur is focused on both their customer factory and their money factory. Either by taking the lead themselves in each area or by having a strong management team and advisors dedicated to making sure both sides of the business are operating together as a well-oiled machine.

How you thought about the quality of your money factory recently? Is it strong? Is it weak?

Take a few seconds to rate the quality of the money factory in your business on a scale of 1 to 10 (where 1 is horrible and 10 is fantastic).

FREE REPORT:A 3-Part Plan to Breathe Financial Life Back into Your Business. If you are an entrepreneur or business owner, this FREE GUIDE provides you a step-by-step, simple process for creating a financial future that is bigger and brighter than your past. Click here to get it FREE.

01/23/2017

"I found accounting nearly impossible to learn because of the bubbling moat of boredom that surrounds the entire field.

But a basic understanding of accounting is necessary to be a fully effective adult in a modern society, even if you never do any actual accounting on your own.

… Accounting is part of the vocabulary of business, and if you don't understand it on a concept level, the world will be a confusing place.

… You can pay others to do your accounting and cash-flow projections, but that only works if you can check their work in a meaningful way. The smarter play is to learn enough about accounting and spreadsheets that you understand the basics."

There are three things you can do to better understand the accounting and financial side of your business:

Ask and answer this question every month: What happened last month (financially speaking)?

Ask and answer this question every month: What's about to happen (financially speaking)?

Pay attention!

In the end, accounting (and financial statements) are about keeping track of money!

Do you know where your money is hiding? J

FREE REPORT:A 3-Part Plan to Breathe Financial Life Back into Your Business.If you are an entrepreneur or business owner, this FREE GUIDE provides you a step-by-step, simple process for creating a financial future that is bigger and brighter than your past. Click here to get it FREE.

Allocating capital wisely - Allocating your excess cash flow wisely is about deciding how much to retain and re-invest in your business and how much to distribute to owners. That's the beauty of a business that generates excess cash. You have the money to continue to invest and build your company. Or you can distribute some (or all) of the excess cash to the owners so they can invest in assets outside the business. Both are designed to help you increase your net worth over time.

Managing risk – Managing risk is about being wise with debt and ensuring you take risks in a measured, calculated fashion. And making sure that you are insuring risks adequately and considering worse case scenarios as you invest and grow. The last thing you want to do is create a strong net worth only to have it wiped away with one bad decision.

Driving the value of your business – Making your business worth more and more money over time will have a huge impact on your personal net worth. That means ensuring the business can function without you, that systems and repeatable processes exist to ensure customers are happy, that you have the financial side of the business under control, and always working on ways to improve the business and drive profitability and cash flow higher.

Financially speaking, I believe the goal in business is to generate above average profitability and cash flow while making your business worth more and more money every year.

Do that well and you are on your way to enjoying a sizeable net worth!

FREE REPORT:A 3-Part Plan to Breathe Financial Life Back into Your Business.If you are an entrepreneur or business owner, this FREE GUIDE provides you a step-by-step, simple process for creating a financial future that is bigger and brighter than your past. Click here to get it FREE.

Convert assets into cash – The speed in which you convert assets like accounts receivable and inventory into cash is more important than many business owners realize. Days Sales Outstanding (DSO) and Days Inventory Outstanding (DIO) are two metrics that will help you manage and monitor the speed in which you turn these assets into cash. These two metrics are even more important if you are growing your business rapidly. See my post here on DSO.

Plan and control capital expenditures (capex) – These are the purchases you make for longer term assets to sustain your existing business as well as to invest in new assets to create future growth. Capital expenditures are poorly managed in most companies. It's like every company has a "capital expenditures back door" that is left open and seldom monitored. The result is a big drain on your cash flow. See my post here on how to properly plan and monitor your capital expenditures.

Manage debt - Debt can be an important tool in helping you build your business. But it can also be misused and become an anchor around your neck (and your cash flow). One of the reasons to focus on generating strong cash flows is to help you pay down debt on an accelerated schedule. I talk more about using debt wisely in my 3-Part Plan to Breathe Financial Life Back into Your Business here.

We all know that generating strong cash flows is the path to surviving and thriving in business.

Which of the four drivers of cash flow needs your time and attention the most right now?

Remember, it's all about the cash! J

FREE REPORT:A 3-Part Plan to Breathe Financial Life Back into Your Business.If you are an entrepreneur or business owner, this FREE GUIDE provides you a step-by-step, simple process for creating a financial future that is bigger and brighter than your past. Click here to get it FREE.

Take a quick minute to ask yourself the following questions about your company's profitability.

In which of the four areas is my business performing well right now?

In which of the four areas is my business NOT performing very well right now?

Your answers may help you define some short-term priorities. J

FREE REPORT:A 3-Part Plan to Breathe Financial Life Back into Your Business.If you are an entrepreneur or business owner, this FREE GUIDE provides you a step-by-step, simple process for creating a financial future that is bigger and brighter than your past. Click here to get it FREE.